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Foxtons to face tough second half of 2017 says City analyst

Foxtons - a company seen by many as a barometer of the London housing market - is likely to face a challenging second half of the year, a City analyst has warned.

Foxtons comes under the City’s microscope more than most other agents active in the capital because it is quoted on the London Stock Exchange and because of its large 67-branch network covering much of Greater London.

Now Jefferies’ analyst Anthony Codling says that Foxtons’ figures for the first half of the year - to be released to shareholders later this month - are likely to reveal that Foxtons earned between £5m and £7m between New Year and the end of June. If true, this will be a massive drop on Foxtons’ £13.1m earnings delivered in the first half of 2016.


Codling says that fall - if confirmed - will be down to London’s housing market suffering from economic uncertainty triggered by Brexit and domestic political issues. “We appreciate that estate agents need volumes, homes to sell and the shortage of stock is likely to hit Foxtons hard” he warns.

The first half-year figures are also likely to suffer because Foxtons’ large lettings interests - which typically brings in significant revenue in September - has costs spread throughout the year.

But the second half of 2017 is unlikely to be much easier for Foxtons, Codling says.

“Our [earnings] estimate is £8.8m to £10.8m compared to £11.5m in H2 2016, the period which included the unexpected result for the EU referendum. The result was particularly acute for London, the most pro-remain region of the UK” he says.

Codling - who has praised the Foxtons business model in the past, including making favourable comparisons between the agency and Purplebricks - nonetheless warns that the agency should not expand too far from core London locations. 

“We like the Foxtons model, we think it works well across its existing estate, although we have concerns about extrapolating it too far from the central zones” he says.  

“However we do not think we need to worry about overly assertive branch expansion in the near term. The market is tough but the market is also cyclical, and if sentiment towards the London housing market continues to weaken we may see some attractive entry points into Foxtons shares” adds Codling, hinting at share price falls in coming weeks and months.


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